MREL for mortgage banks reduces funding needs in times of crisis

Analysis - August 2018 - No. 11

Authors Danmarks Nationalbank
Subject Denmarks Nationalbank´s analyses of financial stability; Financial regulation; Financial legislation
Type Analysis
Year 2018
Published 21 August 2018
Danmarks Nationalbank's calculations show that the mortgage banks' total funding need in periods of diving house prices will be smaller with an MREL than without an MREL. This is because an MREL will increase the mortgage banks' funding need in normal times, thereby ensuring that they are better prepared for periods of falling house prices and an increasing top-up collateral requirement. This will make the funding needs of the mortgage banks less sensitive to house price fluctuations.